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Identifying common illegal debt collection practices

It can be challenging for debt collection companies to stay on the right side of the law. These companies are required to follow the law that outlines how they can contact debtors and collect money. When they fail to do so, the Federal Trade Commission (FTC) can shut them down, ban them from operating and even file lawsuits against them. Below, you will find common illegal debt collection practices.

Debt collection firms are not permitted to make threats when trying to collect money they are owed. Debt collection companies often threaten to tell the debtor's neighbors about their debt, threaten bodily harm and even threaten to have them arrested.

The Chapter 7 means test

Should one ask the average Bloomfield resident to describe personal bankruptcy, the most likely answer would be that it forgives a person’s debts. What they are describing is a broad view of Chapter 7 bankruptcy. There is a good reason why most default to this assumption; Chapter 7 is the most popular form of bankruptcy. According to information shared by the American Bankruptcy Institute, nearly 64 percent of the non-business bankruptcy cases in the second quarter of 2018 were filed under Chapter 7.

There are other options when it comes to bankruptcy, yet with the option of having certain debts completely discharged, one might wonder why anyone would file under a different chapter. Indeed, most people may want to file Chapter 7, yet not everyone qualifies to do so.

What is the difference between Chapter 11 and Chapter 13?

While you may know that there are clear distinctions between Chapter 7 and Chapter 13 bankruptcies, you may be more unclear with Chapter 11. As most Connecticut residents know, Chapter 11 bankruptcy primarily benefits business owners and corporations, although a small number of individuals can also take advantage of this option. Before you commit to a plan, you should clearly understand how these bankruptcy types differ.

As our previous blog posts have explained, Chapter 13 bankruptcy allows people to restructure and repay their debts within a reasonable amount of time. If you are considering filing for personal bankruptcy, you may choose this option if you have a steady income and do not want to lose non-exempt assets, such as your home. On the other hand, FindLaw explains that Chapter 11 bankruptcy is usually for businesses, corporations and partnerships to reorganize how their company runs without facing asset liquidation.

What is a deed-in-lieu of foreclosure?

As a Connecticut homeowner in financial distress, you want to avoid foreclosure on your property and the negative consequences it can have on your credit score. To accomplish this, sometimes you need to make some sacrifices. A deed-in-lieu of foreclosure is an arrangement in which your mortgage lender agrees not to foreclose on you in exchange for you turning over ownership of your property. 

According to the Consumer Financial Protection Bureau, a deed-in-lieu is a method of mitigating loss. The benefit is that you avoid the negative credit impact from a foreclosure, which may make it somewhat easier to start over new. However, one of the downsides of a deed-in-lieu is that you still lose your house. 

Is Chapter 7 the option for you?

As a Connecticut resident currently weighing your bankruptcy options, you may have been looking into Chapter 7, as it is one of the most popular choices. It offers many benefits, though there are some drawbacks as well. Today, we will look at both.

According to FindLaw, Chapter 7 bankruptcy is also called liquidation bankruptcy due to the fact that it allows you to liquidate assets in exchange for the erasure of unsecured debts. This can be a great option if you are unable to make a repayment plan, which is necessary for the popular alternative, Chapter 13. For example, if you are currently underpaid, recently got fired, or otherwise do not have enough income to pay off a debt, Chapter 7 may be right for you.

Can you declare bankruptcy for student loans?

Many people in Connecticut go to college with the hope that their investment pays off. unfortunately, you may find that circumstances conspire against you and prevent you from repaying your educational debt. Contrary to popular belief, bankruptcy could be an option in select cases to help you get out from under your student loans.

It is true that, in some cases, federal student loan debt is not eligible for discharge under Chapter 13 or Chapter 7 bankruptcy. However, you should look at your unique circumstances before you determine that you are unable to get relief for your student loans.

Are you eligible to file for Chapter 13 bankruptcy?

Of the many different bankruptcy options available to Connecticut residents, Chapter 13 is one of the most well-known ones. However, not every person may be eligible to file for it.

As FindLaw states, certain things may allow you to qualify for Chapter 13 bankruptcy while others may disqualify you. In order to qualify, you must not be barred by a past bankruptcy. There is a time limit between discharging debts through bankruptcy. If you filed for Chapter 13 before, you must wait two years before filing again. If you filed for Chapter 7, you must wait four years.

How can you avoid foreclosure?

Connecticut residents can fall into debt for numerous reasons. One possible risk is being unable to pay your house off, in which case it will be foreclosed. We at the Law Offices of Charles A. Maglieri will discuss ways you can avoid foreclosure.

There are several ways to avoid foreclosure, but one of the most prominent is through filing for Chapter 13 bankruptcy. This can sometimes be colloquially known as wage earner's bankruptcy. It involves creating a repayment plan that you work together with other parties to create, and is signed off by your lender. 

What do you do if you cannot make mortgage payments?

There are many advantages to purchasing and owning a home in Connecticut, from both a financial and personal point of view. However, owning a home can become burdensome if you have a change in financial circumstances and can no longer afford mortgage payments. 

According to the Consumer Financial Protection Bureau, you have several possible options to avoid foreclosure if this happens. A deed-in-lieu allows you to avoid foreclosure by giving the home back to the lender. A short sale is also an opportunity to dispose of your property and mitigate your loss. 

The story behind Fannie Mae and Freddie Mac

People who have obtained a mortgage in Connecticut, or are actively seeking one, have likely heard the names Fannie Mae and Freddie Mac. They might sound like the names of friendly new neighbors, but in reality, they are government-sponsored agencies who guarantee most of the mortgages in the United States.

To guarantee a loan is to make a promise to assume responsibility for paying a borrower's debt, either in whole or in part, in the event of a default. By providing mortgages, lenders take a significant financial risk. Having Freddie Mac and Fannie Mae guarantee the loans reduces the risk for lenders and makes mortgages more affordable for borrowers. 

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Contact my office to discuss your debt relief needs directly with me as your lawyer. I offer a free initial consultation to all new clients where you can learn more about your legal options and what I can do to help you. I am available during regular business hours and by appointment at other times. You can reach me by phone at 860-242-0574 and 860-952-3674 or via email.

My law firm is a debt relief agency as so designated by Congress in the year 2005. I help people file for bankruptcy relief under Title 11 of the United States Code, known as the Bankruptcy Code.

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